Buying UK Shares - Are we gaining or losing?

[ontherun]

This may sound like a silly question, but if you were to buy sterling shares now, are we currently gaining with the sterling rate or when we buy, is the share converted from sterling to euro, wherby we'd be losing? Hope I'm making sense!

 

[Chris]

Assume that price of a share has been exactly the same for the past few weeks; then you can say that your euros buy more pounds, so you can buy more shares than a few weekes ago.
Just remember, that if you base your investment on the strength of the euro, you will be speculating not only on the shares going up, but also on the euro weakening. Nothing wrong with taking that approach, but it increases the risk significantly.

 

[z109]

To use a grossly simplified example:

You buy 100 shares of 1 GBP each when the exchange rate is 1 EUR. Your shares are held in sterling, your costs are in EUR

If GBP goes down to 80 cents (that is, 1 GBP buys 80 cents), your shareholding is worth 80 euros (but still 100 sterling).
If GBP goes up to 120 cents (that is, 1 GBP buys 120 cents), your shareholding is worth 120 euros (but still 100 sterling).

Does that make sense? As Chris says, in times of volatile currency movements, you are talking on more risk.

 

[ontherun]

Thanks for the replies. I was trying to work out when would be a good time to sell. I purchased them when the exchange rate was 82cent but now that it's hitting 92 cent, I know I will have to wait until the shares go up even further to make any gain as the rate is going against me when I sell.